WT/TPR/OV/W/3
Page 83
Organization
WT/TPR/OV/W/3
14 June 2010
(10-3235)
Trade Policy Review Body
REPORT TO THE TPRB FROM THE DIRECTOR-GENERAL
ON TRADE-RELATED DEVELOPMENTS[1]
1. This Report reviews trade and trade-related developments in the period from 1November2009 to mid-May 2010.
EXECUTIVE SUMMARY
2. Despite the severity of the global financial crisis and its widespread impact on economies around the world, governments have largely resisted resort to trade barriers. However, there are still instances of trade restrictive measures taken during the period under review. There also appears to be an increasing trend in the use of export restrictions affecting mainly food products and raw materials. In a few cases, some governments have taken trade facilitating actions. Given the current economic environment and the risks ahead, governments should remain vigilant to preserve the level of trade openness and act to remove the most trade restrictive measures taken over previous periods.
3. It is important that all governments continue to actively participate in the trade monitoring exercise, which is of general systemic value to the multilateral trading system. The TPRB encouraged all Members and Observer Governments to continue providing timely and accurate information on their trade and trade-related measures.
Fewer new restrictions, but they are accumulating; priority to exiting restricting measures
4. The monitoring of trade and trade-related measures implemented during the period under review reveals that some governments continue to have recourse to new trade restrictions. However, it also confirms the overall pattern of a declining trend in terms of instances of new measures and their coverage of trade. Although this declining trend is to be welcomed, careful attention has to be given to the growing risk of a potential accumulation of trade-restricting measures implemented since the outbreak of the global financial crisis. This risk is compounded by a relatively slow pace of removal of previously adopted restrictive measures. Exiting current restricting measures should be a priority.
5. The factual information collected by the WTO Secretariat on new trade and trade-related measures implemented between 1 November 2009 and mid-May 2010 shows a number of instances of countries taking measures that have the potential to directly or indirectly restrict trade. The most common measures identified during this period were the initiation of new trade remedy investigations (although the first four months of 2010 have shown a significant cooling-off of trade remedy use), increases in import tariffs, import bans, and import licenses. There also continued to be concerns raised by trading partners that some countries are restricting market access for imported agricultural products based on sanitary and phytosanitary considerations.
6. The new trade restricting or distorting measures that have been introduced since 1 November 2009, along with the initiation of new investigations into the imposition of trade remedy measures (a number of which may never result in the actual imposition of the measures or the restriction of trade), are estimated to have covered collectively around 0.4percent of annual world imports. The new measures have been concentrated in particular on base metal products (mainly steel products), followed at some distance by machinery, agricultural products and transport equipment.
7. On the other hand, some governments implemented, during this period, measures to facilitate trade, in particular by reducing or temporarily exempting import tariffs, and by terminating a few trade-restrictive actions started in previous periods. However, based on a simple count, measures that have the potential to restrict trade outnumber those that facilitate trade by a factor of 3:2.
8. There also appears to be an increasing trend in the use of export restrictions, affecting in particular food products and commodities. The most frequent measures used in this area include increases of export duties (in some cases the introduction of new duties), export prohibitions, and export quotas. The increase in export restrictions seems to be happening worldwide. A few countries also took measures to reduce export restrictions. However, export restricting measures outnumber export facilitating measures by a factor of 5:2.
The global economy is recovering, but risks ahead
9. The global economic recovery has been evolving better than expected in the last six months, but the recovery is still subject to significant downsize risks. In many parts of the world the strength of the rebound is moderate. World GDP is expected to grow by 4.2 per cent in 2010 (compared with a decline of 0.5 per cent in 2009), mainly driven by good performance in emerging developing countries. Merchandise trade is forecast to expand by 9.5percent in 2010 after the unprecedented decline of 12.2percent a year earlier. In advanced economies, unemployment is projected to stay close to 9 per cent through 2011 and then to decline only slowly. Trade has an important role to play in firmly anchoring the economic recovery, and offers a sustainable, non-debt creating source of growth and development.
10. Even if the global economy is on a recovery path, the financial crisis and the global economic downturn that followed have had far-reaching effects, especially on developing countries. Economic growth in the world’s low income economies has held up much better that during previous recessions. However, the overall impact of the crisis on poor countries should not be underestimated. The IMF and World Bank reported that the global economic crisis has slowed the pace of poverty reduction in developing countries. The IMF estimates that by the end of 2010, 64 million more people will have fallen into extreme poverty than without the crisis.[2]
More open trade can support the nascent economic recovery
11. Significant risks for the trading system remain as long as unemployment continues at peak levels and government fiscal positions tighten. Keeping trade open has been and remains crucial in providing opportunities for countries to emerge from the global crisis, in particular at times when public deficits are growing for many. These opportunities can only be seized fully through a prompt and successful conclusion of the DDA. Until the Round is concluded successfully, there also remains a large amount of room in which protectionist pressures can continue to agitate. Implementing a co-ordinated programme of trade liberalization and facilitation on a global scale, including reducing the gaps between applied and bound levels of trade restriction and distortion will substantially strengthen the capacity of the multilateral trading system to help governments resist these pressures. Based on a WTO Secretariat estimate for 22countries (developed and developing) and on the draft DDA modalities on the table, the trade-weighted average bound tariff would be cut by half (from 8.5 to 4.1percent).
12. Pending a successful conclusion of the DDA negotiations, it is important that governments recommit to refrain from raising trade barriers as a means of overcoming the effects of the global crisis, and to roll-back those trade restricting measures already put in place during previous periods.
As many stimulus programmes end, governments should remain vigilant
13. Even if thus far resort to protectionist measures has been relatively muted, governments must remain vigilant. Economic conditions around the world, in particular persistent high levels of unemployment and mounting pressure on government finances, may continue to feed into protectionist pressures. The expected end of the government stimulus measures may add to those pressures. It is noteworthy that in some cases, governments have been confronted with strong calls to resist protectionist actions. These calls seem to have played their part in the restraint that most governments have shown in restricting trade.
14. Many government stimulus measures are still in place, but newer specific programmes are becoming less frequent than immediately after the start of the crisis. Given the sheer size of these packages, stimulus measures taken to rescue sectors of systemic importance (such as banking) or to preserve jobs (as in the automobile industry) or to stimulate demand (such as consumption tax reductions or "buy national" provisions in government procurement legislation) may be more significant in terms of their potential impact on trade and free competition than traditional trade restrictions. However, any detailed economic analysis of these measures should consider the extraordinary situation in the global economy and the exceptional responses judged necessary by governments, while avoiding counter-productive distortions of trade.
Special analysis shows selected sector's trade performance and sectoral policies
15. The sectoral analysis in the last section of this report illustrates the situation in three particularly sensitive areas (car industry, iron and steel sector, and textiles and clothing), where the global crisis seems to have been felt much harder and where governments implemented a number of trade and trade-related measures to help these sectors overcome the crisis. The analysis shows that these sectors were confronted with adjustment problems long before the crisis and that important challenges are still in front of them. They are characterized by high employment, overcapacity and were already the focus for trade restrictions.
16. The automobile industry was hit hard by the global crisis with demand falling sharply. Governments implemented a number of measures to support producers' balance sheets and to sustain consumer demand. The iron and steel industry was also heavily affected by the crisis. Many governments adopted fiscal stimulus packages, as well as a number of trade-specific measures, to support this industry. Trade-restricting measures in the textiles and clothing sector have been limited.
Efficiency of trade monitoring depends on more active participation of delegations
17. The regular monitoring of trade developments has contributed to improved transparency in the multilateral trading system. WTO Members and Observer Governments have, overall, actively participated in this exercise. Active participation of all Members and Observer Governments, through the provision of initial information and the verification of listed individual measures, is needed to ensure the accuracy, comprehensiveness and relevance of this type of monitoring. The monitoring exercise is sometimes rendered difficult, for instance when a government denies the existence of trade measures or practices that have been publicized by the press and raised by its trading partners as a matter of concern.
18. Improved transparency in the multilateral system depends also on strengthening Members' response to WTO notification requirements. WTO bodies have embarked in numerous exercises to improve the timeliness and functioning of their respective notification procedures. In some of them, such as the SPS and TBT Committees, a marked increase in the number of official notifications of relevant measures has been observed. The monitoring report for the end of the year will present an overview of developments regarding notification requirements in the WTO.
I. INTRODUCTION
19. The Director-General has reported regularly to WTO Members on trade and trade-related policy developments in the context of the global financial and economic crises. This Report reviews trade-related developments during the period 1 November 2009 to mid-May 2010.[3]
20. The TPRB has agreed to continue the monitoring of trade and trade-related policies and called for an active participation in this transparency exercise of WTO Members and Observer Governments.[4] Replies to the request from the Director-General for information on measures taken during the period under review were received from 27 Members and Observers (counting the EU as one), of which 16 are members of the G20 (counting the EU Member States separately).[5] The WTO Secretariat has drawn on these replies, as well as on a variety of other public and official sources, to prepare this Report. The Secretariat has received good cooperation from the majority of delegations that were requested to verify the accuracy of the information contained in Annexes 1 and 2. Where it has not been possible yet to verify the information this is noted in the Annexes.[6]
21. The country-specific measures listed in Annex 1 and 2 are new measures implemented by governments during the period under review to facilitate or restrict trade flows.
22. To contribute to informed discussion about the potential impact of policy measures in the context of the global financial crisis, this report includes in the last section of the Report a more detailed presentation of selected sectors (textiles and clothing, steel, and automobile) in which the sector's overall production and trade performance are described.
II. ECONOMIC AND TRADE TRENDS
23. The global economy is recovering better than expected, but in many parts of the world the strength of the rebound is moderate.[7] The recovery is proceeding at different speeds within and across regions, and unemployment is still high in many economies. Emerging and developing economies are performing better. The IMF forecasts a continuation of the recovery for the world economy but at varying speeds across and within regions.[8] World GDP is expected to grow by 4.2 per cent in 2010 (compared with a decline of 0.5 per cent in 2009), mainly driven by good performance in emerging developing countries. Merchandise trade is forecast to expand by 9.5percent in 2010 after the unprecedented decline of 12.2percent a year earlier. Exports of developing economies are expected to expand by more than 11percent, while those of developed economies are expected to grow by 7.5percent. Chart 1 illustrates the contribution of developing countries to trade recovery. Recent data show that the value of merchandise trade was around 25percent higher in the first three months of 2010 than in the same period of 2009, fuelled mainly by demand from Asia and higher commodity prices.[9]
A. Global economic and trade developments
24. Since last November, global trade flows have continued to rebound strongly from the depressed levels seen during the depths of the global financial crisis. The volume of world trade in the first quarter of 2010 was up 17 per cent over the same period in 2009 and 3.5percent higher than the previous quarter.[10] This was the fourth consecutive quarterly increase in all regions. The magnitude of the turnaround was greater in some regions than in others (Chart 2). Asian economies in particular have seen a stronger resurgence in trade, while developed economies other than Japan have lagged somewhat, with slower but still positive trade growth (Chart 3).
25. The expansion of GDP in developing countries has increasingly been supported by private consumption and investment rather than government expenditure, an indication that growth is becoming self-sustaining. However, the revival of economic activity to date has had little impact on unemployment, which remains in the neighbourhood of 10 per cent in some developed countries (Chart 4).